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Right to Manage

If you own a leasehold flat or apartment, then you may have the right to manage the building your home is in. Read on to find out more about the Right to Manage, how to take over the management of your building, the costs involved and what you need to consider before you begin.

right to manage

What is the Right to Manage?

When you live in a block of flats or apartments it is up to the freeholder or property management company to manage all the communal areas, any services available to residents such as a concierge and ensure the building is kept in a good state of repair.

However, under the Commonhold and Leasehold Reform Act 2002 leaseholders were given the ‘Right to Manage’. This means you have the right to group together with other leaseholders and form a Right to Manage (RTM) company in order to take control of your own building and run it yourselves.

Right to Manage can be a great option if you feel your building is being badly managed. Perhaps repairs and maintenance aren’t being completed in a timely manner or you feel you are being overcharged for buildings insurance or services.

However, if you are unhappy with the way your property is being managed you don’t have to exercise your Right to Manage, there are other options. You could force your freeholder to appoint a new management company by taking them to a tribunal. There is more on this at the end of this guide. Alternatively, you could club together with your fellow leaseholders and buy the freehold for your building. Find out more on this with our guide to buying your freehold.

If you apply for the Right to Manage, the current landlord or freeholder can object with a counter-notice, but that won’t defeat your application. The only reason your application may be refused is if you don’t meet one of the qualifying conditions listed below.

Do I qualify for Right to Manage?

To apply for the Right to Manage your building you must meet all the following criteria:

At least half of the flats owned by long leaseholders must be part of the application.

The building in question must be a residential property with at least two flats. So, if you own a leasehold house you wouldn’t qualify.

A minimum of two thirds of the flats in your building must be owned on leases that were for more than 21 years when first granted.

Non-residential areas in the building such as shops must not make up more than 25% of the building’s entire floor area. As of February 2022, the government is consulting on raising the threshold to 50% so more leaseholders can exercise their Right to Manage.

Your building may not qualify if there are less than four flats and the freeholder lives in one of them.

All the flats must be in one building. If your development has multiple blocks of flats a RTM company would need to be formed for each building. That means each building would need to meet all the above criteria.

If you live in council or a housing association property then you can’t use Right to Manage. Instead, you can form a Tenant Management Organisation to take over the management of your building.

 Considering Right to Manage or Buying the Freehold? Our property experts can provide free initial advice with no strings attached. 

Pros and Cons of the Right to Manage

The Right to Manage process can be complicated and involves taking on a lot of responsibility. Make sure it is the right decision for you before you begin.

The Advantages

  • No rip-off service charges – You’ll control what you spend so you can haggle for the best deals and keep services charges to a minimum.
  • Save money – You may save money as you can choose not to pay for a property management company.
  • Fast repairs – You will be able to get maintenance and repairs completed more quickly as your Right to Manage company will only be focussed on your building. So there won’t be the delays often experienced when dealing with a management company that is handling multiple properties.
  • Quality maintenance – You can control who you employ to work on your building. Unhappy with the quality of the work? It is in your power to switch contractors.
  • Cost effective – Right to Manage gives you control of your building without the extra costs involved in buying the freehold. With Right to Manage you’ll have to cover legal fees and other set-up costs but not the price of buying the freehold.

The Disadvantages

  • Running a company – It will be your duty to make sure your RTM company is run correctly. This means registering it with Companies House, filing accounts, annual reports and collecting service charges. 
  • Responsibility for the building – It will be down to you to ensure you can maintain your building. You will need to ensure you have the right insurance in place and, potentially gather money from leaseholders for a contingency fund to cover upkeep and repairs.
  • Handling disputes – Before you take full responsibility for your building you will have to ensure any existing service charge disputes are settled. This can be a lengthy legal process depending on the situation. You may also have to take enforcement action against your own neighbours if anyone falls behind on their payments, this could make life a little awkward.
  • You need to get on with your neighbours – If you are going to group together to run your building you need to be able to cooperate with your other leaseholders. It is a good idea to meet with your neighbours beforehand to ensure you get on and have a shared view of how the building should be managed. 

If you decide the disadvantages outweigh the advantages you may want to consider buying the freehold instead as it comes with additional benefits such as no more ground rent. Find out more in our guide to buying your freehold.

The Right to Manage Process

The first step in claiming the Right to Manage your building is to set up an RTM company, also known as a Residents Management Company. This will need to be registered with Companies House and have proper Articles of Association laying out the company’s purpose and how it will be run.

You then send a notice to all leaseholders in your building giving them the opportunity to participate in the Right to Manage claim. This can be tricky if some of the flats in your building are rented out as you will need to send the letter to the registered owner of the flat. You can usually find their address by applying to the Land Registry for the title deeds.

Once you have sent out the notice inviting participation you must wait at least two weeks before sending a notice of claim for the Right to Manage to the freeholder.  This notice must be sent to everyone who is listed as a landlord under a lease of the whole building or any part of it. It also must go to any other party to the lease and any person appointed to manage the building.

Both the notice inviting participation and the notice of claim need to be worded correctly with prescribed explanatory notes included. If you get them wrong they will be invalid, so it is a good idea to get professional help with these from a leasehold expert.

Exercising your Right to Manage is complicated. Our experts provide free initial advice — how long it will take and how much it costs. 

Your freeholder can challenge a Right to Manage claim by sending a counter-notice within a month of receiving the notice to claim. If this happens you can apply to the First-tier tribunal (Property Chamber) or, if the building is in Wales, the Leasehold Valuation Tribunal. They will rule on whether you have the Right to Manage. You should only be turned down if you fail to meet the qualifying criteria.

Right to Manage Costs

There are costs associated with Right to Manage. Once you have served a notice of claim, the Right to Manage company is liable for any reasonable costs incurred by any of the landlords or management companies during the process. This could run to a couple of thousand pounds, typically a budget of around £200 per flat is sensible. Make sure you know how you would cover this money before you start.

There are also smaller admin costs such as postage for documents, the cost of looking up title deeds and registering your RTM firm with Companies House.

A Right to Manage claim can be complicated and mistakes could add to your costs so you will find it invaluable to get expert advice to help you navigate the Right to Manage process.

Right to Manage Solicitor

Do you need a Right to Manage solicitor? There isn’t any requirement for you to get one, but setting up an RTM company and navigating the process of taking over management of your building can be complicated. It is a legal process and so you may want to consider getting advice from a solicitor to ensure that you do everything properly.

But bear in mind very few solicitors deal with the right to manage on a day to day basis. That’s why we have teamed up with the Bonallack and Bishop solicitors. Lease extension, enfranchisement and right to manage cases are all they do. They are also members of the Association of Leasehold Enfranchisement Practitioners (ALEP), the only organisation for solicitors and surveyors specialising in this area.

Our Right to Manage solicitors provide free initial advice and an estimate detailing how they can help.

Acquisition of the Right to Manage

If all goes to plan and the freeholder doesn’t challenge your claim, then you should take over management of your building four months after the date on the notice to claim.

If you do have to go to a tribunal, and it rules in your favour, your company should acquire the Right to Manage three months after the tribunal decision.

When you take over the Right to Manage the freeholder should supply you with details of any existing contractors and inform them of the change in management. They should also transfer any service charges that have been collected but not yet spent.

The freeholder can also apply to be a member of the RTM company.

Setting up a Right to Manage Company

The Right to Manage must be done via a company, you cannot do it as an individual or group of leaseholders. This means you must form a company to claim your Right to Manage.

For your company to be recognised you must have Articles of Association which set out the purpose of your company and how it will be run. You will also need a Memorandum of Association. This is a document listing the people who intend to form the company. You will also need to assign people to be officers of the company, for example you will need company directors.

You can set up a company and draw up these documents yourself or you can use a solicitor. The documents need to be filed with Companies House who can also provide you with leaflets explaining the process.

Once you have set up your RTM company you can invite any other qualifying leaseholders to join.

Ongoing Management

Once you have acquired the Right to Manage you take on all aspects of managing the building listed under the lease, but you must inform the freeholder of anything that requires their consent such as alterations to the building.

 The RTM company does not have to keep on any existing contractors meaning you can switch to others if you are unhappy with the cost or quality of the service.

You also now have the power to enforce obligations under the lease, but you cannot use the forfeiture procedure, that remains under the power of the freeholder.

The RTM company is responsible for ensuring the common areas are lit, heated and clean. You also need to make sure the building is adequately insured and that all service charges are collected.

Right to Manage Problems

Claiming the Right to Manage your building can be great as it gives you the power to run it as you see fit but there are common problems that can arise. These include:

  1. Understand what you are taking on – make sure you are aware of the level of responsibility that comes with Right to Manage and the time it can take up.
  2. Unexpected costs – Right to Manage comes with costs over and above your usual service charge. These include admin fees such as paying for secretarial work, accountancy charges to submit annual returns and insurance for company directors. Make sure you budget for company costs when deciding how to spend money collected through service charges.
  3. Funding shortfall – If your building needs immediate repairs or improvements, you may find there isn’t enough in the pot to cover the costs. This could mean Right to Manage company members have to pay extra money to pay for repairs in the interim before the next round of service charges are collected.
  4. Poor management – A common problem with Right to Manage occurs when leaseholders don’t fully understand what they are taking on and then struggle to run their RTM Company and their building. One way to avoid this is to use an accredited and professional managing agent. The Leaseholders Charity has an accreditation scheme which can help you find a good managing agent (there is a list of firms at the bottom of that link). 

Exercising your Right to Manage is complicated. Our experts are ALEP registered, provide free initial advice and can guide you through the process. 

Alternative to Right to Manage

If you are unhappy with the way your building is being managed there are alternatives to Right to Manage.

One option is Leasehold Enfranchisement. This is a legal right under the Leasehold Reform Act (1993) and allows leaseholders who own flats in the same building to group together and buy the freehold for their block. It effectively makes you your own landlord.

Another option is to go to the First-tier Tribunal (Property Chamber) to demand a new manager takes over the landlord’s Right to Manage the building under section 24 of the Landlord and Tenant Act 1987. If a new manager is appointed, they will be directed by the tribunal to manage the building in the best interests of both the residents and the landlord.

Government changes affecting leaseholders 2022

The government’s planned reforms to abolish ground rent and make it easier and fairer to extend your lease or buy the freehold will not affect the right to manage. And, as the changes won’t be in place for another couple of years at least, you may want to apply for right to manage now and then enfranchise when the reforms become law. But speak to a lease expert for more advice.

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